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NEW LEVY CAUSES SERIOUS UPSETS IN BANKING SECTOR

By Hlengiwe Ndlovu | 2018-03-13

MOST foreign-owned banks are likely to shut down as a result of the newly introduced bank revenue levy announced by Minister of Finance Martin Dlamini in his budget speech recently, Standard Bank Chief Executive Mvuselelo Fakudze has warned.

The levy will require banks to cough out 2.5 per cent of their annual income to help boost the government’s revenue base. Speaking in a breakfast meeting held at Gigi’s Restaurant at Ezulwini yesterday with members of the Editor’s Forum, Fakudze warned of the adverse effects the bank revenue levy will have on the banking industry, customers and the economy at large.

Fakudze was not the first banker to raise an alarm on the shocks this new levy will bring to Swaziland’s banking industry if enforced, as Chairman of the Swaziland Bankers Association Dennis Mbingo who is also First National Bank CEO shared similar sentiments immediately after the announcement made by the minister of finance. Government is on a mission to diversify revenue sources from the Southern African Customs Union (SACU) hence several taxes were reformed including VAT, sin tax, income tax, the bank revenue levy and other interventions.

The Standard Bank CE explained that Swaziland is a small economy to begin with and since most of the country’s banks are headquartered in other countries, the new levy could cause the parent companies to shut down their operations in the country. He did not hide the fact that the levy will make local banks less profitable as compared to what subsidiaries in other companies offer to the parent companies.

He predicted that the new levy would also have far-reaching consequences such as causing a hike in bank products in the event that parent companies decide not to close Swaziland subsidiaries.

“Government may be forcing investors which are the parent companies of most of the banks we have in Swaziland to review their reason of being in the country. With Swaziland being a small economy, the percentage of what we give back to our parent companies is far less than what subsidiaries in other countries are offering, so now the bank revenue levy will make us even less profitable” he explained, reiterating the negative impact that this new levy will have on the economy.

Fakudze was quick to add that in the event that the foreign owned banks decide to cease doing business in Swaziland, the country will only be left with only SwaziBank and the Swaziland Building Society which he said would not be able to cope with the magnitude of banking in the country.

Fakudze further expressed the banking fraternity’s sheer surprise on the latest developments.

“To be honest, we never saw this coming. And also, we keep wondering why the banking industry, why not introduce a levy on farmers or miners who are also using the country’s mineral resources,” the CE said, also quickly adding that his sentiments were not by any means politically motivated.

Whilst promising to challenge the bank revenue levy through mediation with the ministry of finance, Fakudze also pledged the banking sector’s willingness to cooperate and comply. “We are not policy-makers but law-abiding citizens and we pledge to implement whatever policies government enacts.”